PRINCIPLES OF CORPORATE FINANCE 2026
FINAL REVIEW EXAM
◉ What does the controller's office do? Answer: They handle cost
and financial accounting, tax payments, and management
information systems
◉ What is the treasurer's office responsible for? Answer: Managing
the firm's cash and credit, it's financial planning, and its capital
expenditures.
◉ Capital Budgeting Answer: The process of planning and managing
a firm's long-term investment.
◉ Cash flow generated be an asset ________________ the cost of that
asset Answer: exceeds
◉ Capital structure (finanical structure) Answer: the specific
mixture of long-term debt and equity the firm uses to finance its
operation.
◉ Working Capital Answer: a firm's short-term assets, such as
inventory, and its short-term liabilities, such as money owed to
suppliers.
,◉ Sole proprietorship Answer: a business owned by one person; the
simplest type of business to start and is the least regulated form of
organization; limited to the owner's life span' the amount of equity
that can be raised is limited to the proprietor's personal wealth;
unable to exploit new opportunities because of insufficient capital;
difficult to sell.
◉ unlimited liability Answer: The owner is personally and fully
responsible for all losses and debts of the business
◉ Partnership Answer: similar to a proprietorship, except that there
are two of more owners (partners)
◉ general partnership Answer: all partners share in gains or losses,
and all have unlimited liability for all partnership debts, not just
some particular share
◉ Partnership agreement Answer: the way partnership gains and
losses are divided.
◉ limited partnership Answer: one or more general partners will
run the business and have unlimited liability, but there will be one or
more limited partners who do not actively participate in the
business.
, ◉ Advantages and Disadvantages of a partnership Answer:
Relatively informal agreement are easy and inexpensive to form;
unlimited liability for partnership debts; all income is taxed as
personal income to the partners.
◉ Primary disadvantages of sole proprietorships and partnerships
Answer: unlimited liability for business debts on the part of the
owners; limited life of the business; difficulty of transferring
ownership.
◉ Corporation Answer: the most important form (in terms of size)
of business organization in the United states. A legal "person"
separate and distinct from its owners, and its many of the rights,
duties, and privileges of an actual person. Can borrow money and
own property; can be sued or sue; enter into contracts; has to pay
taxes
◉ stockholders Answer: elect the board of directors who then select
the managers and control the corporation.
◉ Management Answer: charged with running the corporation's
affairs in the stockholders' interests.
FINAL REVIEW EXAM
◉ What does the controller's office do? Answer: They handle cost
and financial accounting, tax payments, and management
information systems
◉ What is the treasurer's office responsible for? Answer: Managing
the firm's cash and credit, it's financial planning, and its capital
expenditures.
◉ Capital Budgeting Answer: The process of planning and managing
a firm's long-term investment.
◉ Cash flow generated be an asset ________________ the cost of that
asset Answer: exceeds
◉ Capital structure (finanical structure) Answer: the specific
mixture of long-term debt and equity the firm uses to finance its
operation.
◉ Working Capital Answer: a firm's short-term assets, such as
inventory, and its short-term liabilities, such as money owed to
suppliers.
,◉ Sole proprietorship Answer: a business owned by one person; the
simplest type of business to start and is the least regulated form of
organization; limited to the owner's life span' the amount of equity
that can be raised is limited to the proprietor's personal wealth;
unable to exploit new opportunities because of insufficient capital;
difficult to sell.
◉ unlimited liability Answer: The owner is personally and fully
responsible for all losses and debts of the business
◉ Partnership Answer: similar to a proprietorship, except that there
are two of more owners (partners)
◉ general partnership Answer: all partners share in gains or losses,
and all have unlimited liability for all partnership debts, not just
some particular share
◉ Partnership agreement Answer: the way partnership gains and
losses are divided.
◉ limited partnership Answer: one or more general partners will
run the business and have unlimited liability, but there will be one or
more limited partners who do not actively participate in the
business.
, ◉ Advantages and Disadvantages of a partnership Answer:
Relatively informal agreement are easy and inexpensive to form;
unlimited liability for partnership debts; all income is taxed as
personal income to the partners.
◉ Primary disadvantages of sole proprietorships and partnerships
Answer: unlimited liability for business debts on the part of the
owners; limited life of the business; difficulty of transferring
ownership.
◉ Corporation Answer: the most important form (in terms of size)
of business organization in the United states. A legal "person"
separate and distinct from its owners, and its many of the rights,
duties, and privileges of an actual person. Can borrow money and
own property; can be sued or sue; enter into contracts; has to pay
taxes
◉ stockholders Answer: elect the board of directors who then select
the managers and control the corporation.
◉ Management Answer: charged with running the corporation's
affairs in the stockholders' interests.
